Good news – The Federal Reserve (The Fed) just expanded the terms of it’s Main Street lending program for small businesses struggling during the COVID-19 pandemic, now giving business owners access to loans of $100,000 or more. The Main Street New Loan Facility Program, created in early 2020, is part of the CARES Act.

Via this program banks are provided with a 95% guaranteed repayment when they extend credit under this program to a business borrower. Previously, the program’s minimum loans were $250,000, leaving a gap for small business owners who did not need, or qualify for a larger loan. The Fed also changed rules about what prior loans are counted in the application, making it more accessible to small businesses.

Here’s what you need to know:

  • $75 billion in loans are now available; these loans will not be forgiven, as is anticipated with the Paycheck Protection Plan (PPP) loans.
  • Borrowers must have been established prior to March 13, 2020 as a business, and must be solvent at the time that the loan is made. Exception can be made when insolvency is caused solely by the economic and business circumstances caused by COVID-19.
  • Loans, including interest, are due within five years of the loan date; no payments are required, and interest does not accrue, for the first two years.
  • Interest will be based upon the adjustable rate of the London bank Offered Rate (LIBOR) plus 300 basis points. As of October 30, LIBOR is approximately 0.2%, making the current loan rate approximately 3.2%.
  • The principal will be amortized based upon 15% of the loan amount due at the end of the third
  • year, 15% at the end of the fourth year, and a balloon payment of 70% at maturity at the end of the fifth year. Loans can be prepaid without penalty.
  • Businesses that received EIDL (“Economic Injury Disaster Loans”) are not eligible, but those individuals and businesses who received the EIDL non-repayable grants of between $1,000 and$10,000 are.

Check with your bank for more information on this exciting new loan option.

Recent Questions:

Q: Can I use my loan to pay off other loans or debt?

A: According to the Federal Reserve, borrowers can pay other loans that require payment during the time the Main Street Loan is out.

Q: Will the government offer a new round of PPP loan?

A: It’s hard to know as talks have stalled in Congress over the past few months.

Jill Kuksa & Deb Hanselmann